The credit rating agency S&P announced downgrades of six European banks on Tuesday.
Following new laws under the EU Bank Recovery and Resolution Directive that were adopted in April 2014 with adherence necessary by January 2015, European member state banks are now forced to slash liabilities by 8% if they require financial aid. Standard & Poor agency subsequently cut the rating for banks in Germany, UK, Italy and Austria saying that government support was less likely if the banks got into trouble. As well as the six downgrades, another five banks were put on S&P’s watch list.
Downgrades: Credit Suisse, Barclays, Lloyds, Bank of Scotland, RBS, HSBC, and Ulster Bank
On Watch Negative: Raiffeisen Zentralbank, MBank, Unicredit, Commerzbank, and Deutsche Bank
HSBC was cut to A Stable from A+ Negative, RBS to BBB- from BBB+ and Lloyds to BBB from A-.
A negative outlook to A/Watch from A/Negative was given to Deutsche Bank, and UNICREDIT Bank to A-/Watch from A-/Negative.
S&P published the calculation that $500bn (£330bn) in bonds need to be issued from the world’s 30 largest banks to comply with the new regulation to protect the public from more bank bail-outs. European leaders have conceded and are planning to force the Big 30 into holding a ‘buffer of bonds’ equal to 16%-20% of risk assets, such as loans, by 2019.
Lloyds and Deutsche stocks slumped at market opening and have since risen with Deutsche price at levels last seen in October 2014.
MT4 chart: Lloyds
MT4 chart: Deutsche Bank
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